RBS makes £752m profit, but no US settlement

RBS chief executive Ross McEwan

Royal Bank of Scotland on Friday announced its first bottom line profit for 10 years — but said the timing of its crucial multibillion pound settlement with the US Department of Justice (DoJ) “is not in our control.”

RBS was bailed out by the UK taxpayer for £45.5 billion during the last financial crisis and the delayed DoJ settlement is weighing on RBS’s share price and complicating the UK Government’s plan to sell down its 71% stake.

The settlement is over the mis-selling of residential mortgage-backed securities (RMBS) by RBS in the US under the watch of former CEO Fred Goodwin.

RBS shares fell about 4.5%.

RBS said it made 2017 operating profit of £2.2 billion and attributable profit of £752 million.

Total income for 2017 was £13.1 billion, up from £12.59 billion a year earlier.

“I am pleased to report to shareholders that the bank made an operating profit before tax of £2,239 million in 2017, and for the first time in ten years we have delivered a bottom line profit of £752 million …” said RBS CEO Ross McEwan.

“At the same time as building financial strength, we have also made progress with the legacy of our past and improving our core bank.

“We have delivered on this by resolving a number of our litigation and conduct issues.

“This includes reaching settlements last year with FHFA in respect of our historical at Retail Mortgage Backed Securities (RMBS) activities and with claimants in relation to our 2008 Rights Issue.

“In 2017 we also continued to run down our legacy assets. The wind-up of our non-core division, Capital Resolution in 2017, was an important moment. 

“As part of the support we received in 2008 and 2009, the bank was mandated to meet certain requirements under a State Aid restructuring plan.

“In 2017, we received approval for an alternative remedies package, which replaced our original plan to divest of the business formally known as Williams & Glyn.

“This is a good solution, both for improving competition in the UK SME banking market, and for shareholders.

“With this solution in place and currently being implemented, the number of legacy issues the bank faces has reduced.

“However, we have one major legacy issue that we have yet to resolve which is with the US Department of Justice.

“The timing of the resolution of this issue is not in our control.

The bank has received significant media attention for its treatment of some small business customers between 2008 and 2013.

“To those customers who did not receive the experience they should have done while in GRG we have apologised.

“We accept that we got a lot wrong in how we treated customers in GRG during the crisis.

“However, these were complex and subjective cases with each case having unique facts about what was the right thing to do.

“The bank welcomes the FCA’s confirmation that the most serious allegations made against the bank have not been upheld and that the steps the bank announced in November 2016 to put things right for customers are appropriate.

“We have made significant progress in improving our culture since then.

“Today this bank is a simpler and safer organisation, with colleagues now fully focused on our customers.”

more to follow …